Have you ever heard about the differences? Free Trade vs Fair Trade are more like opposing forces, even if the words sound almost the same!
Both Free Trade and Fair Trade policies address the topic of the regulations of commercial activities across countries. However, they address the topic from different perspectives.
Regulation of commercial activities are done mainly through Free and Fair Trade.
Free Trade
Free Trade is focusing on the reduction of barriers and policies that favour certain countries or industries. In other words, Free Trade represents bilateral agreements between different countries that allows for unrestricted export and import of goods.
Free Trade enhances the efficiency of global markets by increasing the economic growth. At the same time the goods might become less expensive, which has a downside to it.
For example, one of the reasons of cheaper prices might be a certain Trade violation, such as the use of cheap labor.
Therefore, Free Trade essentially calls for more freedom within the international Trade market. Focus is on removing restrictions, regulations and tariffs placed on the export and import of goods.
Fair Trade
Fair Trade, however, is focusing on favouring the rights of workers, them having improved working conditions and also, Fair Trade seeks to eliminate pay discrepancies from country to country.
It is a trading partnership based on transparency, dialogue and respect in order to seek greater equity in international trade. Possibly, Fair Trade allows for better securement of right of marginalised groups.
All the mentioned above happens through offering better wages, standard working conditions, but also protecting child labour issues.
Fair trade is also trying to regulate trade based on the concerns on violations, such as environmental conditions and as above mentioned, violation of human rights and labor laws.
What are the similarities?
Both Free Trade and Fair Trade is aiming at increasing wealth globally. For example, Fair Trade is aiming at maintaining tariff barriers to protect the producers while Free trade is protecting the traders against unhealthy competition.
Both Trades are regulated by specific players. Fair Trade is regulated by small businesses and communities and Free trade is regulated by the government.
What are the advantages of Free Trade?
Some advantages of Free Trade include: lower prices, increased efficiency & economic growth.
While the potential problems with Free Trade might include job losses, vulnerability & pressure and tax havens.
What are the advantages of Fair Trade?
Advantages of Fair trade include: better wages for producers, no child labour, community investment, better working conditions.
However, as well as with Free Trade, there are potential problems present also with Fair Trade. As for example need to pay certification fees, higher prices of products mean limited customers.
Further, customers have available less product choice and last but not least, not all producers can access Fair Trade.
Free trade Vs Fair Trade summary
We all might have a different opinion about this, coming from a different place. However, when i am looking at this topic from my point of view, i think Fair Trade is better than Free Trade.
It is because Fair Trade is aiming at producing a product without the exploitation of environment and the labor.
Free Trade aims at generating more profit regardless of the specific production methods. In the ideal world, maybe, a thriving economy can be ideally achieved by the coexistence of both Free and Fair Trade.
